The $79 Kindle Costs Amazon $84 to Make

When Amazon announced the exciting Kindle Fire tablet and the new touchscreen Kindle, the company also announced that the ad-supported basic Kindle ereader was dropping down to just $79. The ad-supported Kindle was first launched in April of this year and cost $114, which was seen as extremely cheap for an ereader at the time. When the price dropped to $79, well, we couldn't believe our eyes. However, it seems that selling the device so cheap means Amazon is actually taking a hit when it comes to production costs.

MainStreet reports it has received confirmation from iSupply with regard to the production cost of the Kindle. iSupply said it did a teardown of the new Kindle and found that the total cost of materials used in each device, including the e-ink display screen and printed chip board, is $78.59, while the total cost of putting it together is $5.66. This brings the production cost of each $79 Kindle to $84.25 and would mean Amazon is taking a loss of $5.25 with each unit sold.

Of course, while Amazon is taking a loss of $5 for each Kindle sold, you have to remember that this is the ad-supported model. Amazon can offer it to us for a low price because it's receiving advertising revenue from the companies using the device to promote their products or services. What's more, each person with a Kindle also logs into their Amazon account during device set-up, which means they have a handy direct line to Amazon's book store, where they can spend more money on books.

Amazon is going for the route of selling the device for as little as possible and make money off the backend. It's giving the handle away and selling the razor blades. That's also why the Kindle Fire is $199 when the nook tablet is $249 for a very similar device, spec wise. Amazon has way more things they can sell and make money off of than B&N does. If B&N wants to avoid going the way of Borders they'll need to really beef up their online products and price match the Fire.

evo_7

Just another reason why Amazon is building a greater customer base and loyalty in contrast to other companies like Best Buy. I think Amazon along with NewEgg are few of the e-commerce businesses that still listen to their customers and give them reasons to shop with them over anyone else.

reprotected

I thought it was illegal for a company to sell a product with a price tag lower than it's cost.

SmileyTPB1

That only applies to Apple products.

gelid

i like the way Amazon is doing business. It is probably the only competition for the iPad

wildkitten

reprotectedI thought it was illegal for a company to sell a product with a price tag lower than it's cost.

That's only gasoline.

sykozis

reprotectedI thought it was illegal for a company to sell a product with a price tag lower than it's cost.

Not sure where you got that idea..... Companies can price their products however they see fit, as long as someone is willing to buy it... The only exception is gasoline and cases of price fixing.

jsc

reprotectedI thought it was illegal for a company to sell a product with a price tag lower than it's cost.

I thinking about getting the $99 Kindle Touch after Tom's Hardware does a review of it against the other e-readers.

This is why Google and Amazon are the new breed of tech companies. Unlike their predecessors, they can deliver a good product at a reasonable price, and make plenty of money in any given market without having to use shady business tactics to monopolize it.

halcyon

bidniss_manThis is why Google and Amazon are the new breed of tech companies. Unlike their predecessors, they can deliver a good product at a reasonable price, and make plenty of money in any given market without having to use shady business tactics to monopolize it.

Don't worry...Apple will learn. They might not want to learn...but they will.

A $5/reader loss still doesn't explains the pricing on the eBooks at Amazon. Why is it that an eBook costs more than a hardcover in many cases?

I did not see anyone giving props to sony for the playstation when it costed them more to produce than it costed to customers :S

Not hatting on amazon, just wtf guys, this means nothing much. They take a tiny hit and make tons more by selling 0's and 1's later :P

kellogg87

@Anonymous: It's 99 euro because the "special offers" option is not offered. The US kindle w/o special offers is also $99.

monktongaz

Why is this even news? Loss leaders have been part of business for as long as businesses have been operating.

DaddyW123

remember, it's not amazon that is selling the ebooks at a higher price than the hard covers - it's the greedy publishing companies. Amazon and other e-retailers tried to fight that fight in our favor and lost. If you want what's right - and have cheaper ebooks, write nasty letters to the publishers, tape it to brick and throw it through their windows.(disclaimer - that is meant in humor only - I am not inciting a riot in any way. Violance is not the answer, even againts dirty, greedy publishers)

back_by_demand

reprotectedI thought it was illegal for a company to sell a product with a price tag lower than it's cost.

No, unless you have the lost money coming from a seperate revenue stream it's just stupid....If you have a one-off product with no peripherals, like a fridge or a wall clock, if you sold those less than cost the company would just go bust....However with peripheral items such as electronic books, i'm sure the internal numbers show that an average Kindle user buys an average of XYZ books a year but at an average cost of $10 per book they really only need to sell 2 or 3 books for the profits to break even and they know yu are going to buy books otherwise what is the point of buying a Kindle in the first place?...So not illegal, and in this instance not stupid either, in fact very smart because the cheap selling price is a hook that leads to a loyal repeat customer....Doesn't anyone around here have an MBA or am I just pissing in the wind?

nforce4max

Now consider the cost of packaging and shipping, it is more than $84 for the final cost of each unit. In the long run they are built very cheaply like most tablets and piles of these with cracked screens are on eBay all the time. It is to thin and underweight for there to be enough protection for the screen so they can bend and flex enough to crack then screen. Almost all tablets are useless with a broken screen or broken screen digitizer. Archos is built like there is nothing there but cardboard and no real rma policy unless one forks over $200 for a replacement. Coby often has issues with internal nand flash going bad so they fail to boot, also cracked screen digitizer. Velocity Micro has the same screen digitizer as most other tablets but uses a slot MIPS cpu instead so it can't run most apps. Pandigital's screen digitizer cracks easy but it easily fixed and built rather well compared to most, terrible wifi. Apps and date stored on separate nand flash micro sdhc card. Ipad same cracked screen issues as others but a lot less freedom about data. There is a lot of others to name but the issues are mostly all the same besides lack of ram, slow cpu, flimsy construction, dangerous battery (Lithium polymer) that bloat up, apps comparability, and lack of any expandability and ports.

fb39ca4

just like microsoft & xbox

wardler

Pazero01I did not see anyone giving props to sony for the playstation when it costed them more to produce than it costed to customers :SNot hatting on amazon, just wtf guys, this means nothing much. They take a tiny hit and make tons more by selling 0's and 1's later

No... just.. no. The PS3 is practically an eMachine with a BD-player and a low/mid-range graphics chip. And just because BD-players (probably the component of greatest worth in the whole system) are worth a lot, doesn't mean it cost Sony a lot of money to put one in it.

eaw2539

wardlerNo... just.. no. The PS3 is practically an eMachine with a BD-player and a low/mid-range graphics chip. And just because BD-players (probably the component of greatest worth in the whole system) are worth a lot, doesn't mean it cost Sony a lot of money to put one in it.

Before you go spouting off and insulting a product and what someone says, do a little research first.